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Tuesday, October 28, 2008

Today the buyers stepped out of the shadows, but yet again the sellers stepped in to push markets off their highs off the day. The FTSE and other world indices are still in positive territory for the day, but a wave of poor economic data has kept a lid on any sustained buying. US house prices are down 16.6% year on year, having slumped over 30% since their peak in 2004. In the face of a continual erosion of the value of their homes and the ever present warnings about the biggest slow down since the great depression, it is little wonder that US consumer confidence figures came out at record levels. Today’s reading of 38.0 is the lowest in the indicator’s history going back to 1967.

Markets are still extremely jittery as evidence by today’s wild ride on Volkswagen which temporarily became the world’s largest company by market capitalisation, overtaking ExxonMobil for a short while as it rose above 1,000 Euros this morning. Just two days ago, it was trading at 200 Euros. Porche increased their stake in the company to 75%, but the real reason for the huge spike was the squeeze on short traders. Volkswagen has the highest short interest of any stock on the German DAX index. Although shareholders in Volkswagen are rather happy right now, today’s spike is more a symptom of the lack of liquidity in today’s market place. The German DAX is the best performing index today, largely on the back of the Volkswagen move.